European Stocks, U.S. Futures Advance; Shares in Asia Decline

By Sarah Jones

Oct. 16 (Bloomberg) -- European stocks gained and U.S. index futures advanced as higher oil lifted the earnings outlook for energy producers and Google Inc. reported profit that beat analysts’ estimates. Asian shares retreated.

Repsol YPF SA rallied 1.7 percent as Spain’s biggest oil company discovered the presence of crude in a natural-gas well offshore Venezuela and oil traded above $77 a barrel. Ericsson AB rose 2.4 percent after its mobile-phone venture with Sony Corp. reported a smaller-than-estimated loss. Lloyds Banking Group Plc and Swiss Life Holding AG climbed more than 3 percent as analysts recommended the shares.

Europe’s Dow Jones Stoxx 600 Index gained 0.7 percent to 248.92 at 9:49 a.m. in London, extending a one-year high and bringing its weekly advance to 2.5 percent. Of the 31 companies in the U.S. Standard & Poor’s 500 Index to have reported earnings since Oct. 7, 28 have beaten analysts’ estimates on a per-share basis, according to data compiled by Bloomberg.

“There could be another leg up if the earnings season continues to be as promising as it has started,” Lothar Mentel, chief investment officer at Octopus Investments Ltd. in London, said in a Bloomberg Television interview. “I am hoping to see more top line growth coming through. Cost cutting really won’t do it anymore.”

The Stoxx 600 has gained 57 percent since March 9 as companies from Royal Philips Electronics NV to JPMorgan Chase & Co. reported earnings that exceeded estimates. The rally has pushed valuations on the index to 49.5 times earnings, near the most expensive level since 2003, Bloomberg data show.

U.S. Futures

Futures on the S&P 500 climbed 0.1 percent as Google reported profit and sales that beat estimates after the recovering economy boosted demand for online ads and e-commerce.

Gains in U.S. futures were limited as International Business Machines Corp. reported a decline in contract signings and Advanced Micro Devices Inc. posted its 12th straight loss. Bank of America Corp. and General Electric Co. are scheduled to announce results today.

The MSCI Asia Pacific Index slid 0.8 percent as LG Display Co., the world’s second-largest maker of liquid-crystal displays, reported earnings that missed analysts’ projections and forecast that product prices will fall.

Repsol added 1.7 percent to 19.05 euros after the company said tests on the natural gas revealed the presence of crude oil, which the Venezuelan government said may help speed the development of the field. The Cardon IV field ranks as Venezuela’s largest gas discovery and one of the world’s five biggest finds in 2009, Repsol said.

BP, Petroplus

BP Plc, Europe’s second-largest oil company, gained 2.3 percent to 568.4 pence while Total SA, the region’s third- biggest, advanced 2.6 percent to 42.96 euros. Petroplus Holdings AG, the largest refiner in Europe, surged 5.5 percent to 28.2 Swiss francs.

Crude oil traded above $77 a barrel in New York, capping its biggest weekly gain in two months, on an unexpected decline in U.S. gasoline stockpiles and refinery utilization.

Ericsson climbed 2.4 percent to 72.90 kronor after Sony Ericsson Mobile Communications Ltd. reported third-quarter net loss of 164 million euros ($245 million), less than analysts anticipated. The company also announced new financing, totaling 455 million euros, partly guaranteed by its parent companies.

Lloyds advanced 3.3 percent to 94.38 pence. Deutsche Bank AG upgraded the mortgage lender to “buy” from “hold,” citing the shares’ valuation. Analyst Jason Napier boosted his price estimate to 115 pence from 100 pence in a note to investors.

Swiss Life Surges

Swiss Life rallied 5.4 percent to 141.5 francs after Citigroup Inc. raised its recommendation for Switzerland’s biggest life insurer to “buy” from “hold.” The analysts increased their price estimate on the shares by 33 percent to 160 francs.

National Express Group Plc tumbled 27 percent to 342 pence after CVC Capital Partners Ltd. decided not to make an offer for the U.K. bus and rail company. National Express said a stock sale is now “the most appropriate course of action.”

Industrial production in the U.S. probably rose in September for a third consecutive month, putting manufacturing at the forefront of the emerging economic recovery, economists said before a report today.

Output at factories, mines and utilities climbed 0.2 percent following increases of 0.8 percent and 1 percent respectively in August and July, according to the median forecast of 77 economists surveyed by Bloomberg News. Another report may show consumer sentiment this month slipped from the highest level in more than a year.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.